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Market Concerns Rise Over Potential Fed Rate Cuts Impact
According to BlockBeats, anticipation for a Federal Reserve rate cut is growing, but JPMorgan's London strategy team warns that the underlying reasons for such a cut may not benefit the stock market and could trigger adverse market reactions. Mislav Matejka, a strategist at JPMorgan, highlighted that the market has already priced in an additional 18 basis points of rate cut expectations in recent weeks. The key issue lies in the factors driving the rate cut.
JPMorgan outlines three potential scenarios for the rate cut:
The first scenario involves the Fed cutting rates due to a significant slowdown in economic activity.
The second scenario, considered the ideal 'Goldilocks' outlook, sees economic growth remaining resilient while inflation is controlled, thus not exerting pressure on consumer purchasing power.
The third scenario suggests that even with some inflationary pressures, the Fed might opt to cut rates, possibly influenced by the U.S. government.
JPMorgan strategists anticipate a combination of the first and third scenarios, where economic activity slows but inflation rises. They caution that if this outlook materializes, investors may be disappointed. Historically, since 1980, the dollar tends to weaken before a rate cut and continues to decline afterward, with bond yields also dropping. The strategists expect the dollar to reach new lows and U.S. bond yields to continue their downward trend.
JPMorgan outlines three potential scenarios for the rate cut:
The first scenario involves the Fed cutting rates due to a significant slowdown in economic activity.
The second scenario, considered the ideal 'Goldilocks' outlook, sees economic growth remaining resilient while inflation is controlled, thus not exerting pressure on consumer purchasing power.
The third scenario suggests that even with some inflationary pressures, the Fed might opt to cut rates, possibly influenced by the U.S. government.
JPMorgan strategists anticipate a combination of the first and third scenarios, where economic activity slows but inflation rises. They caution that if this outlook materializes, investors may be disappointed. Historically, since 1980, the dollar tends to weaken before a rate cut and continues to decline afterward, with bond yields also dropping. The strategists expect the dollar to reach new lows and U.S. bond yields to continue their downward trend.
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